Swimming pool financing: The 4 best ways to finance a pool

Valencia Higuera
The Mortgage Reports contributor

How to finance a pool this summer

There may be nothing better than having your own backyard pool — especially when social distancing is still a concern. Unfortunately, installing an inground swimming pool costs over $50K on average. 

What are your options if you don’t have enough cash? Is swimming pool financing available?

Thankfully, yes, there are plenty of ways to pay for a swimming pool. Here are the best pool financing options to consider this year.

Finance a pool using home equity (Sep 23rd, 2021)

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Cash-out refinance to pay for a pool

Refinancing is the process of replacing your current mortgage with a new one. You can often refinance to get a lower interest rate and reduce your monthly payment. 

Depending on how much home equity you have, you may be able to get cash back when you refinance. 

You can use the cash for just about any purpose, like debt consolidation, home improvements — and yes, even building a swimming pool.

Pros of a cash-out refinance

The benefit of a cash-out refinance is that you’re able to borrow up to 80 percent of your home’s equity.

If you’ve had the home a while — or made a big down payment — that could be plenty to finance a new swimming pool.

But cashing out isn’t the only benefit of refinancing. You can also:

  • Increase or decrease your loan term
  • Switch from an adjustable-rate mortgage to a fixed-rate mortgage
  • Switch from one mortgage program to another
  • Remove a co-borrower from the mortgage loan
  • Remove mortgage insurance

At today’s low rates, cashing out might be the best option for homeowners with enough equity to build a swimming pool.

If you can take cash out and drop your rate, it’s a huge win-win.

Check your cash-out refinance eligibility (Sep 23rd, 2021)

Cons of a cash-out refinance

The benefits of cashing out — and lowering your rate — have to be weighed against the overall cost of refinancing.

A refinance involves going through the mortgage application and approval process again. You have to submit updated income information, and your credit score must be high enough to qualify for the chosen mortgage program.

Refinancing also involves closing costs, which range from 2% to 5% of the loan amount. And your mortgage balance increases when you borrow from your equity, which can increase your monthly payment.

Finally, remember that a new mortgage is a ‘secured loan,’ meaning if you can’t repay it, you could risk foreclosure.

So you have to make sure cashing out your equity is a sound decision that won’t negatively impact your finances in the long run.

Home equity line of credit (HELOC) pool financing

A home equity line of credit (HELOC) is a revolving credit line secured by your home’s equity.

Basically, a HELOC functions like a credit card. If you’re approved, you could access enough credit to finance your pool and then pay the money back on a drawn-out schedule.

Pros of a home equity line of credit

The advantage of a HELOC is that monthly payments are based on how much you withdraw from the account, and you only pay interest on what you borrow.

The draw period is typically 10 years, so you’ll likely have access to the line of credit even after you’ve paid off the pool.

Another big benefit is that interest rates on HELOCs are lower than credit cards or personal loans, because the debt it secured by your home.

Interest on a home equity line of credit might even be tax-deductible. You can deduct the interest when using funds to “buy, build, or substantially improve your home,” per the Internal Revenue Service.

Potentially the two biggest advantages to a home equity line, though, are speed and cost. You can usually get a HELOC within weeks, not months, like a traditional mortgage. There’s often little or no documentation required. Sometimes, you can even skip the appraisal.

Closing costs are substantially lower, too. Think, hundreds of dollars in closing costs instead of thousands.

Cons of a home equity line of credit

The downside is that many HELOCs have variable interest rates, so your payments aren’t fixed. 

It also creates a second mortgage, increasing your overall mortgage balance. This increases your ‘risk’ as a borrower, and might make it harder to refinance your primary mortgage in the future. 

Keep in mind, a HELOC is a secured mortgage just like a refinance. If you can’t keep up with the monthly payments, you risk losing your home — and your pool.

Home equity loan pool financing

home equity loan is similar to a HELOC in that it’s another type of second mortgage. 

Using a home equity loan, you can tap your home’s value and borrow cash for many purposes, including a swimming pool purchase.

But instead of accessing a line of credit on an as-needed basis — like a HELOC — you’re given a one-time lump sum of cash to pay for your pool.

Pros of a home equity loan

Many home equity loans have a fixed interest rate and payment, so your monthly cost remains predictable. This is a big benefit over a HELOC.

A home equity loan might have a lower rate than a home equity line of credit or personal loan, too. And like a HELOC, the interest on a home equity loan might be tax-deductible.

Plus, the approval process can be faster and cheaper than a full cash-out refinance.

Cons of a home equity loan

The downside is that home equity loans, though cheaper than a full refinance, come with closing costs. And again, your house acts as collateral for the loan. So you could lose your home if you stop making the payments.

Personal loans or “pool loans”

If you prefer financing a swimming pool without tapping your home equity, you might apply for an unsecured personal loan.

Banks, credit unions, and other financial institutions offer personal loans, and they’re sometimes advertised as “pool loans.” 

Once you’re approved, you’ll receive a lump sum to pay for your swimming pool.

Pros of using a personal loan

Getting funds with a personal loan is often faster than applying for a cash-out refi, HELOC, or home equity loan. 

The application process should be simpler, and in most cases, you’ll get funds within a few days or a week.

Also, since your house doesn’t secure the loan, the bank can’t foreclosure if you stop making loan payments (hopefully this doesn’t happen).

Cons of using a personal loan

The downside is that personal loans have much higher rates compared to home equity financing. So you’ll end up paying more interest over the life of the loan.

To save money on your loan, always compare interest rates among different lenders. This can help you find affordable pool financing.

Should you finance a pool?

Pool financing is a smart idea when you can’t buy a pool outright. But you don’t have to be short on cash to apply for financing. It can also be a smart idea when you do have enough cash for a purchase.

Installing a swimming pool is expensive, and frankly, you might have reservations about spending a large chunk of your personal savings.

Some people would rather keep their cash liquid and finance the purchase, if they can get a low rate and an affordable payment.

Check your financing options (Sep 23rd, 2021)

Pool financing FAQ

How much does it cost to build a pool?

According to Home Advisor, the average cost of an inground swimming pool is about $51,500. The actual cost varies depending on the type of pool, though. Concrete swimming pools cost $30,000 to $50,000; vinyl swimming pools cost $20,000 to $40,000; and fiberglass swimming pools cost $20,000 to $36,500. Keep in mind, the cost of a pool doesn’t stop with the installation. Over 10 years, you can pay an additional $5,000 to $40,000 on pool maintenance. 

What is a pool loan?

Some lenders, credit unions, and other financial institutions advertise “swimming pool loans.” However, pool loans are simply unsecured personal loans used to finance a swimming pool purchase. Personal loans have much higher interest rates than other types of financing. 

What is the best way to finance a pool?

A cash-out refinance might be the best way to finance a pool if you can also benefit from refinancing your mortgage. Refinance loans typically have the lowest rates compared to home equity loans and personal loans. If you prefer access to a line of credit, a HELOC is a better match. For a fixed-rate and a fixed monthly payment, you can think about a home equity loan. And if you don’t own a home — or don’t want to use your home’s equity — you can finance a pool with an unsecured personal loan. 

What credit score is needed for pool financing?

Credit requirements for pool financing vary depending on the lender and the type of loan you use. Minimum scores might range from 600 to 680. If you want to finance a pool using a home equity line of credit or home equity loan, you may need a credit score of 720 or higher. Some lenders have lower credit requirements, so it’s possible to get pool financing with a low score. However, a lower score means you’ll get a higher interest rate and pay more for your loan. 

Is it smart to finance a pool?

Financing a pool is smart when you meet the credit requirements for a loan, and when you can afford the monthly payments. Keep in mind that while swimming pools are great for personal enjoyment, they don’t always have the highest return on investment. This is especially important to consider if you’re withdrawing equity from your home to finance the pool — whether via cash-out refinance, home equity loan, or home equity line of credit. 

How hard is it to get pool financing?

Getting pool financing is easier with good credit or excellent credit. Lenders will check your credit history before approving your application. If you have recent late payments or other derogatory information on your credit report, the bank may deny your application.

Do any pool companies offer financing?

Pool companies are not banks, so they don’t offer “true” in-house financing. Instead, some pool companies work with a network of outside banks and lenders to offer pool loans. 

Check your eligibility for pool financing

An in-ground pool is a big investment — so it’s important to choose the right financing option. 

Think about tapping your home equity to secure the lowest interest rate on your pool financing. 

And no matter which loan option you choose, make sure you shop around to get the best deal. Offers vary by lender, and your rate can make a big difference. 

Verify your new rate (Sep 23rd, 2021)